Mortgage Rates Drop 15 Basis Points, Home Prices Cool 2.7%

Mortgage rates in the United States saw a notable decrease as of April 7, 2025, with the average rate for a 30-year fixed-rate mortgage falling to 6.70%. This reduction of 15 basis points over the past week is part of a broader trend that has seen rates decline for five out of the last six days. The average rate for new 30-year purchase mortgages has dropped to 6.70%, while refinance rates for 30-year loans have settled at 6.43%.

This decline in mortgage rates is closely linked to the cooling of home prices across the country. Annual home price growth slowed to 2.7% in February, with early data for March indicating a further deceleration to 2.2%. This trend is driven by a 27% increase in inventory levels year-over-year, stabilized mortgage rates between 6.6% and 6.7%, and a surge in multifamily completions nationwide. The enhanced ICE Home Price Index (HPI) reveals that 90% of U.S. markets are experiencing slower growth compared to three months prior, with condo prices decreasing annually for the first time in over a decade. Florida markets, in particular, have seen sharp declines in condo prices, with North Port experiencing a 9.4% decrease and Lakeland a 7% decrease.

The stabilization of mortgage rates in the 6.6% to 6.7% range has not been sufficient to prevent this cooling, suggesting that the market has reached an equilibrium point where price adjustments were necessary. The 27% increase in inventory levels has given buyers more options and negotiating power, leading to affordability improvements in 95% of markets. This shift in the housing market carries mixed implications for investors across multiple sectors. Residential REITs and homebuilders face potential margin pressure due to the growing resale inventory. Mortgage originators, on the other hand, face a mixed outlook, with rate stabilization providing operational certainty but the cooling price environment potentially reducing refinancing opportunities.

The cooling of home prices and the stabilization of mortgage rates suggest a more buyer-friendly housing market. Home prices are rising more slowly, and while mortgage rates remain elevated, they have been mostly easing and could be headed lower if the U.S. economic outlook continues to improve. The next month is expected to be choppy, but analysts are confident that rates will trend downward over time. This trend is part of a broader adjustment in the housing market, with broad-based price deceleration and affordability improvements in most markets. The unprecedented condo price contraction deserves particular attention, as it may foreshadow broader market behavior. Condos typically show greater price volatility during market transitions, functioning as the housing market's canary in the coal mine. The regional concentration of price declines suggests targeted risk exposure rather than systemic issues, with Florida's unique insurance and climate challenges creating localized pressure.